Netflix shares fell sharply after the company missed profit expectations for the third quarter due to an unexpected tax dispute in Brazil that cost nearly $619 million. The one-time expense reduced Netflix’s operating margin from a projected 31.5% to 28%, dampening investor enthusiasm despite otherwise solid results.
The streaming leader reported $11.5 billion in revenue, matching forecasts, but earnings per share came in at $5.87, below the $6.97 analysts expected. Shares declined 5.6% to $1,171.24 in after-hours trading on Tuesday.
Netflix said it does not expect the Brazilian tax issue to affect future quarters. Without the charge, results would have exceeded internal guidance. Analysts described the setback as “a temporary hiccup” in an otherwise stable performance.
Looking ahead, Netflix projected $11.96 billion in Q4 revenue and $5.45 per share in profit, both slightly above Wall Street expectations. The company also announced its strongest ad-sales quarter ever, though it withheld exact figures.
Executives struck a confident tone about Netflix’s competitive standing amid industry consolidation. Co-CEO Ted Sarandos said the company remains “choosy” about acquisitions, emphasizing original content and intellectual property over legacy media assets.
The next quarter will feature a high-profile slate including the final season of “Stranger Things” and two live NFL Christmas games, underscoring Netflix’s growing interest in live events.
Analysts noted that Netflix’s long-term growth will rely on diversifying beyond subscriptions through advertising and gaming, both still in early stages. “It’s a strong quarter with a short-term tax drag — the fundamentals remain intact,” said PP Foresight’s Paolo Pescatore.
